Fraud Risk Management Obligations Of NBFCs: Recent Changes Introduced By The RBI

Pursuant to the Master Directions on Fraud Risk Management in Non-Banking Financial Companies dated July 15, 2024 ("Directions"), the Reserve Bank of India ("RBI") recently amended and consolidated the fraud risk management and reporting obligations of non-banking finance companies ("NBFCs") (including housing finance companies). The Directions are applicable to NBFCs in the upper, middle, and base layer (with an asset size of INR 5 billion and above, as per the audited balance sheet as on March 31 of the immediately preceding financial year), respectively ("Applicable NBFCs"). Such layers relate to the existing scale-based regulatory framework for regulating NBFCs ("SBR Framework") based on their size, activity, and perceived risk. The Directions superseded the Master Direction - Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016 ("2016 Master Direction") and repealed three previous circulars dated June 6, 2022, July 1, 2022, and October 3, 2022,